The National Institute of Statistics (INE) will publish this Monday the Annual National Accounting of Spain between 1995 and 2022 and will take advantage of the compilation to review the magnitudes of recent years, especially that of 2021 and, by extension, that of 2022. The 2020 estimate, which is currently provisional, will become final; that of 2021, which is now an advance, will become provisional; and that of 2022 will appear as progress. Before the publication occurs, controversy has already broken out.
Are these reviews common?
Yes, they are, because when the Spanish economy has traditionally fallen, it usually falls more than what has been reflected in the short-term indicators and vice versa: the recovery process is usually more intense than it seems, which is due to that the indicators have a certain delay and not all of them are capable of capturing cycle changes in the short term.
In September of last year, the INE already carried out a review and raised the 2021 GDP by four tenths, from 5.1% to 5.5%. Furthermore, these changes occur in all countries, in fact the United Kingdom Statistics Office did the same last week, recording 2% more GDP growth between 2021 and 2022.
What is less common is that the revision represents a very substantial change with respect to the series initially disclosed.. The problem is that the pandemic made it difficult to measure the economy, which is why all economists predict that a revision will occur, given that other indicators published subsequently are far from those included in the GDP, and that this will be upwards, although There are discrepancies regarding the magnitude.
How much will the review be?
Only the INE knows. There are economists who dare to make forecasts and others who avoid doing so.. Raúl Mínguez, director of the Studies Service of the Spanish Chamber of Commerce, considers that an increase of more than 1% “would be excessive and would require a very well-argued methodology.”. For Manuel Hidalgo, researcher at EsadeEcPol and the Pablo de Olavide University, “anything that is more than 2.5% could be too much and something exceptional”, while there are some like Daniel Fuentes, professor at the University of Alcalá and former advisor from Pedro Sánchez in La Moncloa, who believe that “the current level may be 2 or 3 points above what was estimated.”
Why does it generate debate?
Simplifying the conflict, there are those who defend that if the upward revision is very few points, it will be because the INE measures the economy incorrectly; while, on the contrary, others maintain that any exaggerated revision of the GDP could suggest that the organization is somehow cooking the data.
In between, the opinion of the experts prevails: “The INE will carry out the review it has to do and taking into account all the data, because it is the only one that has all the information.”. One of the problems is that those who have been saying for 3 years that the economy has not recovered the pre-pandemic level, if they now revise the GDP upwards by 4 points, they will see how their story has fallen,” says Manuel Hidalgo, researcher at EsadeEcPol and the University Pablo de Olavide to EL MUNDO.
He defends the work of the Institute: “If you ask Eurostat about the INE, they tell you that it is, if not the best, one of the best statistical institutes in Europe and that it is among the ones that receive the least recommendations, so if the INE says “That 3% needs to be revised is because there have been measurement problems in the worst years of the pandemic that can now be corrected.”
Along the same lines, Gregorio Izquierdo, general director of the Institute of Economic Studies (IEE) and former president of the INE, states that: “measuring National Accounting is very complex and is only within the reach of institutions with a team of highly qualified technicians. like that of the INE. It exceeds individual capacity.. That level of resources, qualification and experience is only in the INE,” he assures.
What consequences would a review have?
An upward revision could mean, for now, that Spain recovered its pre-covid GDP level (that of 2019) much sooner than we thought.. “We could advance a couple of quarters the moment in which we recover the pre-pandemic GDP and it would be in 2022 and not this year,” says Hidalgo.
Furthermore, a revision of last year's GDP could translate into a change in growth expectations for this year, although this will depend on two factors.. On the one hand, the structure of growth, that is, whether the economy advanced more than expected in the first or second part of the year, since if it occurs in the second it could have a carryover effect (purely mathematical and economists call carry over) in this exercise.
On the other hand, Raúl Mínguez, director of the studies service of the Spanish Chamber of Commerce, points out that the impact in 2023 “will depend on where this review comes from”, since it is not the same as the review occurring because there have been more consumption than expected (that, for example, could indicate that we have saved less than we thought and that the possibility of expanding spending further in the future is lower), or that investment has been stronger or the foreign sector has spent more than was believed.
The revision of the GDP will also affect all the magnitudes that are measured in relation to it, such as the public deficit or public debt.. “It all depends on how strong the revision is, but it may mean one or two tenths less of a deficit, depending on how much it is.. If the INE's review is eight points, as some predict, it would be three tenths less of a deficit,” Miguel Cardoso, chief economist for Spain at BBVA Research, tells this newspaper.